Valuer-General of New South Wales v Pyntoe Pty Ltd

Court of Appeal (NSW)|2013-10-04|Before: Macfarlan JA, Gleeson JA, Craig J, MacFarlan JA

Judgment 1MACFARLAN JA: This is an appeal, by leave, from a judgment of Craig J of the Land and Environment Court ('LEC') concerning the costs of a valuation appeal determined by an Acting Commissioner of that Court ([2012] NSWLEC 231). 2For reasons that appear below, the appeal should be dismissed with costs.

THE VALUATION APPEAL 3The respondents are the registered proprietors of land at Matraville in Sydney. They objected to the appellant's valuation of $868,000 of their property as at the base date of 1 July 2010. Following the appellant's disallowance of the objection, they appealed under s 37 of the Valuation of Land Act 1916 to the LEC against the rejection. Acting Commissioner Cowell upheld their appeal and determined the land value at the relevant date to be $748,250. Craig J heard the respondents' application for costs as Commissioners of the LEC are not empowered to make costs orders. 4Craig J ordered that the appellant pay the respondents' costs of the proceedings, including their costs of their Notice of Motion seeking the costs order. The appellant then sought and obtained leave to appeal to this Court. By reason of s 57 of the Land and Environment Court Act 1979, the appeal is limited to questions of law. 5Section 98 of the Civil Procedure Act 2005 empowers the LEC to make orders for costs but the discretion conferred by that section is expressed to be subject to rules of court. These include the Land and Environment Court Rules 2007 ('LECR'). Rule 3.7(2) of those Rules provides: "(2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances". 6Sub-rule (3) states that "circumstances in which the Court might consider the making of a costs order to be fair and reasonable include (without limitation)" a number of specified matters including: ... (c) that a party has acted unreasonably in circumstances leading up to the commencement of the proceedings. ... (e) that a party has commenced or defended the proceedings for an improper purpose, (f) that a party has commenced or continued a claim in the proceedings, or maintained a defence to the proceedings, where: (i) the claim or defence (as appropriate) did not have reasonable prospects of success, or (ii) to commence or continue the claim, or to maintain the defence, was otherwise unreasonable". 7The respondents' appeal concerning the valuation for the base date 1 July 2010 was determined against the background of two earlier appeals by the respondents in respect of the appellant's valuations of the same land. The first related to the base date of 1 July 2006, as at which date the appellant placed a value on the land of $740,000. On appeal, the value was determined to be $731,500. Subsequently, the appellant's valuation of the land of $777,000 as at 1 July 2009 was reduced on appeal to $760,000. 8Nearly five weeks prior to the hearing before Acting Commissioner Cowell relating to the valuation as at 1 July 2010, the respondents made a written offer to the appellant to settle the proceedings upon the basis that a value of $755,000 was ascribed to the property. This amount exceeded the value of $748,250 that was subsequently determined at the hearing. To attract the principles derived from Calderbank v Calderbank [1975] 3 WLR 586, the offer was expressed to be "Without Prejudice Save as to Costs". Some weeks later it was "reissued" as a purported Offer of Compromise under r 20.26 of the Uniform Civil Procedure Rules 2005. As Craig J noted, that rule was in fact inapplicable. It was not suggested on appeal that the making of that Offer of Compromise, or his Honour's reference to it, was of any present significance. On appeal, attention was confined to the earlier Calderbank offer. Neither this offer nor the purported Offer of Compromise was accepted by the appellant.

THE JUDGMENT AT FIRST INSTANCE 9The primary judge noted the following as the matters relied upon by the respondents to justify the making of an order for costs. I omit one matter the relevance of which his Honour rejected: "7 Pyntoe identifies four matters that, it submits, when considered collectively justify the making of the order that it seeks. Those matters are: (i) that it was successful in the appeal; (ii) that it has successfully appealed to the Court on two prior occasions against the Valuer-General's determination of land value for the subject land, being the land values determined for base dates 1 July 2006 and 1 July 2009; ... (iv) Pyntoe made two offers to resolve the proceedings prior to the hearing, each of which was higher than the land value determined by the Court." 10The primary judge referred to the observation of Spigelman CJ in Port Stephens Council v Sansom [2007] NSWCA 299; 156 LGERA 125 at [48], in relation to a similar but not identical rule to the present, that the "starting point must be the presumptive rule that there will be no order as to costs". His Honour then adopted the view of Lloyd AJ in New South Wales Golf Club v Valuer-General New South Wales (No 2) [2012] NSWLEC 186 at [14] that "there must be something 'out of the ordinary' in order to justify a finding that it is fair and reasonable to depart from the presumptive rule" (Judgment [23]). There was no challenge on the appeal to this Court to that approach. 11His Honour then noted, in respect of factor (i) relied upon by the respondents, that, in light of the terms of r 3.7(2) of the LECR, the respondents' success on the appeal to the LEC could not alone justify the making of an order for costs ([25]). 12In relation to factor (ii), concerned with the prior appeals, his Honour noted that a determination of value for each year "is to be approached anew" and that the evidence led before the LEC on a valuation appeal is not confined to the evidence available and considered by the Valuer-General when making his or her determination of land value. He continued: "36 At a level of generality, so much can be accepted. However, both the approach to valuation and the circumstances pertaining at each base date in respect of which appeals were brought before the Court are relevant to be considered. Pyntoe points to the circumstance that in each of the years for which appeals were brought, there had been no significant change to planning controls that would impact differently upon the development potential of the land from year to year. Furthermore, the sales evidence adopted by the Court in each case did not reflect any significant change in the market. The relatively static position that pertained in each year is reflected in the determinations made by the Court demonstrating values within a relatively narrow range: $731,500 for base date 2006; $759,000 for base date 2009 and $748,250 for base date 2010. Of some significance, so Pyntoe submits, is the circumstance that the Valuer-General's assessment for 2010 was $868,000 when the two prior determinations by the Court, particularly that for 2009, had determined the value to be nearly $120,000 less than that figure." 13Having considered the contention and determinations in the prior appeals, his Honour concluded: "45 In summary, the debate between the parties as to the significance of the earlier decisions and comparison of the results in them with the determination made in the present proceedings is one that I consider to be finely balanced in the context of Pyntoe's application for costs. It is therefore necessary to consider whether that balance is altered when considering the other element of Pyntoe's basis for claiming costs, namely its offer of settlement." 14His Honour accepted that a valuation determination on appeal did not create any binding precedent in respect of subsequent years (see Spencer, Bower and Handley, Res Judicata, 4th ed (2009) LexisNexis [13.01]) and continued: "50 I accept that submission as reflecting the correct jurisprudential character of decisions made in proceedings of the present kind. However, where, as here, the Court is called upon to determine the land value of the same land for three years out of five successive years, involving no change of significance to matters relevant to the determination of value and employing the same methodology in arriving at that value, an offer to settle falling within the range of prior determinations made by the Court is a matter relevantly bearing upon the exercise of the costs discretion." 15His Honour referred to s 26 of the Civil Procedure Act concerning mediation and s 34 of the LEC Act concerning conciliation conferences and said: "52 ... There is no reason, founded in the legislation or the rules of Court, to consider that the encouragement to resolve proceedings before the Court is any less important or significant in proceedings of the present kind than it is in any other proceedings before the Court." 16His Honour concluded as follows: "54 Having weighed the matters I have identified, I have come to the conclusion that the combined effect of the decisions of the Court for the 2006 and 2009 base dates, success in the present appeal and the offer of settlement made by Pyntoe are circumstances rendering it fair and reasonable that the Valuer-General pay Pyntoe's costs of the proceedings. The need for Pyntoe to bear the costs of successfully challenging the determination of the Valuer-General for the third time in five years in the face of an offer that at the time at which it was made and having regard to the subsequent determination made by the Court was eminently reasonable, are factors that in summary inform my decision. None of these factors, considered in isolation, would have been sufficient to reach this conclusion. Cumulatively, they reflect 'something out of the ordinary' that justifies departure from the presumptive rule."

GROUND OF APPEAL 1: THE TAKING INTO ACCOUNT OF THE EARLIER APPEALS 17Section 98 of the Civil Procedure Act, when read in light of r 3.7(2) of the LECR, to which it is subject, confers a broad discretion. Spigelman CJ commented in Sansom, in respect of the then applicable rule, that "it is difficult to assert that a factor can never be relevant" ([92]). That rule precluded the making of a costs orders unless it was "in the circumstances of the particular case, fair and reasonable". The present rule is broader. It simply refers to "the circumstances", without confining them to those of the case. Further, whilst examples are given in r 3.7(3) of matters that may be relevant, these are stated not to limit the breadth of sub-rule (2). 18As with all broad discretions conferred by statute, the matters that may be taken into account exclude those that are beyond the contemplation of the statute, having regard to its subject matter, scope and purpose (Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; 162 CLR 24 at 39 - 40; Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [21] - [22] and [31]). This means that, at least in general, the discretion to award costs ought not to be exercised "except for some reason connected with the case" (Donald Campbell & Co v Pollak [1927] AC 732 at 811 - 12; Latoudis v Casey [1990] HCA 59; 170 CLR 534 at 544, 557 and 568 - 9). Examples of extraneous matters that were given in Donald Campbell included the race, religion or hair colour of a party. An example of a matter likely to be considered extraneous in the context of a case such as the present would be litigation between the same parties in respect of land in a different district. 19Although, as is evident from Peko-Wallsend, the question is ultimately one of statutory construction, the principle discernible from Donald Campbell and Latoudis is an appropriate guide to the exercise of the discretion conferred by s 98 and r 3.7(2) in the absence of any contrary indications in those provisions, or the Act or Rules of which they form part (see Oshlack at [35], [65] and [134]). The appellant did not contend otherwise. 20For this ground of appeal to succeed, the appellant would therefore have to establish that, in taking into account the fact and circumstances of the prior valuation appeals, the primary judge took into account considerations that were irrelevant because they were not connected with the case before him. However, in light of the links between the present and previous appeals, I do not consider that he did so. 21Before this Court, the appellant emphasised that the determination of the earlier valuation appeals created no binding precedent so far as the present valuation appeal was concerned. That proposition is uncontroversial, as was recognised by the primary judge. The primary judge did however say that "the approach to valuation and the circumstances pertaining at each base date in respect of which appeals were brought before the Court are relevant to be considered" (see [12] above). Unsurprisingly, this proposition was not challenged before this Court. The prior appeals were recent and related to the same parcel of land. As the primary judge held, there had been no significant change in planning controls in the period covered by the appeals, nor did sales evidence indicate any significant change in the market in that period. The references by the Commissioners in the later appeals to the earlier determination or determinations accorded with commonsense and was indeed desirable (see Segal v Waverley Council [2005] NSWCA 310; 64 NSWLR 177 at [56]). Obtaining guidance from the earlier decision or decisions did not contradict the principle that the determination for each year is to be approached anew. 22In these circumstances, it was open to the primary judge to have regard to the earlier determinations in assessing the fairness and reasonableness of ordering the appellant to pay the costs of the present valuation appeal. The correctness of this proposition can be tested by considering a hypothetical example that is considerably more extreme than the present case: would a judge considering whether to order the Valuer-General to pay the costs of a successful valuation appeal be entitled to take into account the fact that the land owner had successfully appealed in each of the previous 10 years against the Valuer-General's assessment of value of the same land. This would obviously be a relevant circumstance, and nothing in the way the Court's discretion is confined by LECR r 3.7 suggests otherwise. 23This is not of course the present case but the assessment of the degree of relevance of the earlier appeals and the weight, if any, to be given to them was a matter for the primary judge (see Peko-Wallsend at 41). An error as to weighting does not constitute an error of law which would enliven an appeal to this Court under s 57 of the LEC Act. 24It was not necessary for the primary judge to describe the appellant's stance in defending the present appeal as unreasonable, nor did he do so. However it is clear that his Honour took the view that the appellant had adopted a somewhat obdurate attitude. This was a matter connected with the case which he was entitled to take into account. His Honour's findings contradict the appellant's submission to this Court that the three appeals were fundamentally different such that the 2010 valuation appeal cannot be described as one in which the appellant ignored the lessons of the previous cases. 25For these reasons, I would reject the first ground of appeal.

GROUND OF APPEAL 2: FAILING TO DISTINGUISH THE POSITION OF THE APPELLANT FROM THAT OF OTHER LITIGANTS IN CONSIDERING THE CALDERBANK OFFER 26The appellant's submissions in support of this ground were to the following effect: (a)The primary judge failed to recognise that as a result of "the unique position of the Valuer-General as a litigant", there should not be the same expectations as to willingness and ability to compromise made of the Valuer-General as of other parties. (b)The Valuer-General has a general function to ensure the integrity of valuations. (c)The Valuer-General has a statutory function to deal with objections and appeals against valuations and must appear as respondent to such challenges. (d)The Valuer-General is in an unusual position because he has no financial interest in the outcome of proceedings. (e)"An Offer of Compromise will almost always work against the Valuer-General because the Valuer-General cannot make a decision to compromise the proceedings on a commercial basis, without undermining the integrity of valuations". (f)For the Valuer-General to compromise proceedings "on a commercial basis" would result in an injustice to other land owners who had not commenced proceedings challenging the issued land value. 27The appellant identified paragraph [52] of the primary judgment as the point at which the relevant error of his Honour was revealed (see [15] above). However there is in my view no error in the conclusion expressed in that paragraph. As his Honour indicated there, there is nothing to suggest that encouragement to settlement is any less important in valuation appeals than in other proceedings. Opportunities to compromise disputes for reasons relating to the merits of the dispute frequently arise, including in disputes involving valuation issues. 28As was said in Karenlee Nominees Pty Ltd v Gollin & Co Ltd [1983] 1 VR 657 at 669: "The valuation of land and buildings involves matters of judgment. Opinions notoriously vary on this subject ... There is no scientific exactitude in the valuations of land and buildings. They are as hypothetical as the hypothetical purchaser whom they assume". 29This subjective nature of valuation indicates that the opportunities for compromise may be even greater in valuation cases than in many others. That it may not be open to the Valuer-General to settle a dispute for purely commercial reasons, unrelated to the merits of the dispute, does not mean that opportunities for him to resolve proceedings do not often arise or that attempts by him to resolve proceedings having regard to the merits of the case should not be encouraged. 30As the respondents pointed out, many litigants are subject to duties to others and have no personal stake in the outcome of the litigation. Public officials are in this category, as are many private litigants such as trustees. That a litigant is in this category may, depending on the circumstances, be relevant to an assessment of the factual question of whether the litigant acted reasonably or unreasonably in rejecting a Calderbank offer. However it was not suggested that the Valuer-General's role bore in some particular way on whether he acted unreasonably in rejecting the subject Calderbank offer. There was in these circumstances no need for the primary judge to specifically advert to that role, of which he was undoubtedly well aware. 31The most obvious factors bearing on the issue of whether to accept the offer in the present case were the views of the parties' respective experts and the occurrence or otherwise of any changed circumstances since the previous valuation appeals. These were able to be assessed by the appellant just as well as by any other litigant. 32It was not, as he submitted, a matter of the appellant having to ignore his expert evidence if he were to accept the offer but, rather, of him recognising the potential for different views on valuation issues, accepting that his experts' views might not prevail and forming a realistic view on the likely outcome of the appeal. 33For these reasons, I reject the second ground of appeal. The appellant has not demonstrated any error of law on the part of the primary judge in treating the Calderbank offer as relevant to the exercise of his discretion.

GROUND OF APPEAL 3: ORDERING PAYMENT OF THE COSTS OF THE WHOLE PROCEEDINGS 34The appellant submits that the primary judge erred in ordering him to pay not simply the respondents' costs incurred after the date of the Calderbank offer but the respondents' costs for the whole of the 2010 proceedings. If the primary judge had made this order only on the basis of the rejection of the Calderbank offer, this challenge may well have been successful. However, his Honour made it clear that he took into account "the combined effect" of the prior valuation determinations, success in the present valuation appeal and the Calderbank offer (see [16] above). As noted earlier, his Honour recognised that the second of these, success in the present valuation appeal, would not of itself have warranted a costs order in favour of the respondents. Nevertheless, it was relevant to be considered when other factors were present. 35For the reasons I have given, it was permissible for his Honour to take into account the prior valuation appeals. Likewise, it was undoubtedly permissible for him to have regard to the appellant's rejection of the Calderbank offer. When this is recognised, it is apparent that the appellant has not demonstrated any error of law. Relevant factors were taken into account and a decision that cannot be regarded as irrational was reached. Whether or not this Court would have made the same order if it had been in the position of the primary judge is not to the point.

ORDERS 36As the appellant's three grounds of appeal fail, the appeal should be dismissed with costs. 37GLEESON JA: I agree with Macfarlan JA. 38TOBIAS AJA: I agree with Macfarlan JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 October 2013

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